Minister unveils effort to shrink credit blacklist
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Minister unveils effort to shrink credit blacklist

Move would allow debtors to borrow

People seek consultations about how to settle their debts at an event jointly organised by the Justice Ministry and 23 financial institutes at Suan Dusit University in January. (Photo: Apichart Jinakul)
People seek consultations about how to settle their debts at an event jointly organised by the Justice Ministry and 23 financial institutes at Suan Dusit University in January. (Photo: Apichart Jinakul)

Finance Minister Pichai Chunhavajira has pitched shortening the duration for bad debtors to remain on the National Credit Bureau's blacklist, allowing them to access new borrowing opportunities sooner.

Speaking on Wednesday after presiding over the signing ceremony to establish ARI-AMC, a joint venture between the Government Savings Bank (GSB) and Bangkok Commercial Asset Management Plc (BAM) to manage bad debts of state banks, Mr Pichai said the current duration of five years on the National Credit Bureau (NCB) blacklist, plus an additional three years of record-keeping, is too long.

He said he intends to review the legal provisions to see if this period can be shortened, to two years plus three years of record-keeping, or even one year plus three years.

Earlier this month, Mr Pichai said the Finance Ministry is preparing a budget of 10 billion baht to clear the debts of small-scale debtors, removing them from the blacklist.

He said more than 1 million retail debtors at state-owned specialised financial institutions with an average debt per person of 10,000 baht have defaulted and become non-performing loans (NPLs), listed by the NCB.

The government wants to resolve this issue by using a budget of 10 billion baht to clear these debts, removing the debtors from the blacklist so they can gradually repay the state within 2-3 years, said Mr Pichai.

Regarding the ARI-AMC joint venture, GSB and BAM each hold a 50% stake and initial registered capital is 1 billion baht.

He said bad debts from state financial institutions transferred to ARI-AMC will be managed under more lenient debt restructuring conditions, helping debtors avoid being classified as NPLs.

ARI-AMC plans to use a socially responsible approach, while still aiming for appropriate returns, said Mr Pichai.

Initially 45 billion baht worth of bad debts from the GSB will be transferred to ARI-AMC for management, with 70-80% of these transferred debts expected to be successfully managed, he said.

According to Mr Pichai, the factors affecting the debt burden of individuals and small and medium-sized enterprises are both internal and external, including the adverse effects of the pandemic and rising interest costs, which have caused debtors to lack liquidity, being unable to honour their debt repayments.

Regarding the government's debt relief scheme for NPLs of self-employed individuals, he said the government expects by year-end, around 700,000 to 800,000 debtors will return to the status of performing loans.

Vitai Ratanakorn, president of GSB, said the new joint venture firm will enable NPL debtors to be removed from the NCB's blacklist more quickly. For example, he said ARI-AMC can offer debt haircuts or reduce interest rates more effectively than if the debt remained with the financial institution.

According to Mr Vitai, GSB will transfer to ARI-AMC 500,000 bad debtor accounts with a principal debt value of 45 billion baht.

The sales price will be re-evaluated, but will follow market prices, he said.

By the end of July, the first batch of bad debts, comprising 140,000 accounts with a debt value of 10 billion baht, is scheduled to be transferred to ARI-AMC. These debtors have outstanding debts of no more than 20 million baht each.

Next year, Mr Vitai said ARI-AMC will start purchasing additional bad debts from state financial institutions.

The joint venture is expected to operate no more than 15 years, he said.

Registered capital can be increased if necessary, while GSB will support ARI-AMC with low-interest loans to manage additional bad debt acquisitions, said Mr Vitai.

BAM chief executive Bundit Anantamongkol said the partnership will create a synergy between the two organisations.

BAM has 25 years of experience in debt management, having resolved 155,000 cases of bad debt worth more than 480 billion baht, while selling 52,000 non-performing assets valued at 122 billion baht.

GSB has more than 1,000 branches that can serve as contact points or service centres for customers.

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